3 simple pricing strategies for optimising footfall & profits
Whether you run a single site or multi-store chain, newsagents and convenience stores stock thousands of different products, and the pricing strategy around these products is key to your profitability. Pricing is central to every customer interaction and revenue target, therefore getting your pricing strategy right is a fundamental requirement of your store.
An effective pricing strategy can push the profit margins up, whilst maximising on footfall. Although there are many strategies for pricing, we're looking at the top three strategies we consider to be the most effective for optimising both profits and footfall. For these strategies to work effectively, you'll want to use the Reposs Add-ons for Stock Management, and optionally use the Reposs printer and self-edge labels.
Pricing Strategy 1: Target Margin
A straightforward and well-know pricing strategy that triggers automatic retail price changes in response to cost increases, enabling you to guard your margins even in an uncertain market. For example, if your Mars Bars cost £1.00 and your target margin is 20 percent then the retail price on the shelf should be £1.25. If the cost changes from £1.00 to £1.10, then your retail price in-store is automatically adjusted to protect margin, adjusting the retail price of the Mars Bars to £1.38, effectively guarding your 20 per cent margin. We recommend setting up price rules for target margin pricing across your key products where margin might be tight, and a minimum target price is essential. By implementing a target margin pricing strategy you can ensure your margin never dips below the desired level.
Top Tip: try incremental increases of your target margin by +1% every day, week or month and ensure you measure and analyse the average number of sales, footfall, and gather your own customer feedback. If you start hearing complaints about the price, or see the average number of sales dropping, or noticeable decreases in footfall, then you've gone too far and you should readjust the target margin by -1% to drop it back down to when footfall was better. By adopting this method, you should see profit margins increasing, whilst maintaining desired levels of footfall.
Pricing Strategy 2: Fixed Pricing
Fixed pricing basically means you keep your price the same, even if costs change. The reason you'd run fixed pricing strategies on some products is that you want to remain competitive in your pricing, and perhaps there is also the available margin to allow for a cost-effective fixed pricing strategy. Fixed pricing is also known as hard or specified pricing.
For example, if the convenience store down the street sets a retail price of £14.49 for a 20 pack of Benson and Hedges Gold cigarettes, you can drive traffic to your store by implementing a lower specific retail price that doesn’t change with the fluctuating cost of the goods. It's then more likely you'll attain the footfall for the local smokers who save money by visiting your store, and are also then more likely to make additional purchases each visit when picking up their daily, weekly, or monthly cigarette packets.
Fixed pricing has the added benefit of saving time because it requires less management, reducing or eliminating the need to manually manage retail pricing, a requirement of the other pricing strategies.
Pricing Strategy 3: Promotions
Simply put, promotions are pricing strategies that have a start and end date. Common products that run promotional pricing strategies include tobacco and alcoholic beverages as these are crowd-pleasing, footfall inducing products where matching or beating your competitors' pricing or capitalizing on supplier discounts, will drive traffic and footfall to your store. In our first example, we set Mars Bars to 20 percent retail target margin. If, for instance, you run a promotion for your Mars Bars, the promotional price rules would overrule the target margin price rules, allowing you to temporarily adjust your pricing strategy for cost changes or competitive categories. Therefore, promotions are a priority pricing strategy that takes precedence over other pricing strategies for the duration of their activity.
Mix-and-match promotions are a dynamic and flexible way of implementing a promotional pricing strategy that allows consumers to take advantage of multi-product promotions. For example, buy a sandwich, packet of crisps and a small drink for £5.00. A retailer could end up with several combinations at the register. The Reposs EPOS system works in tandem between the back-end and at the front-end point-of-sale device to trigger the mix-and-match promotional pricing after every item is scanned. Consequently, in addition to increasing in-store transactions, mix-and-match promotions can also improve inventory accuracy and tracking.
For more information on how an innovative and smart EPOS can strengthen your business in the longer term, view our EPOS solutions, or contact us today!